DNA Testing Is Not Why 23andMe Is in Trouble

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December 6, 2013 // 11:40 AM EST

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Screenshot of a video for 23andMe's national ad campaign that's since been pulled, from the company's blog

It’s been a rough couple of weeks for 23andMe, Silicon Valley’s favorite genetic testing startup. First, the federal Food and Drug Administration ordered the company to immediately halt sales of its flagship $99 at-home DNA tests, issuing a scathing letter that claims the tests are not backed up by scientific evidence. Now, in the midst of that regulatory maelstrom, 23andMe is being hit with a class-action lawsuit alleging that the firm misled consumers with advertising for its personalized genome services.

The complaint, filed last week by San Diego lawyer Mark Ankcorn, claims that the results of 23andMe’s Personal Genome Service, which purported to offer medical insights based on a person's genetic data, are “meaningless.” It mirrors the FDA’s warning that the company is making false claims about the test’s ability to provide relevant information about medical conditions like breast cancer, diabetes, and coronary heart disease.

The lawsuit estimates that “tens or hundreds of thousands of US customers are entitled to restitution," and seeks at least $5 million in damages from 23andMe. You can read the whole filing here, but here is the gist of the suit:

NATURE OF THE ACTION

1. This proposed class action alleges that 23andMe, Inc. (“Defendant”) falsely and misleadingly advertises their Saliva Collection Kit/Personal Genome Service (“PGS”) as providing “health reports on 240+ conditions and traits”, “drug response”, “carrier status”, among other things, when there is no analytical or clinical validation for the PGS for its advertised uses.

2. In addition, Defendant uses the information it collects from the DNA tests consumers pay to take to generate databases and statistical information that it then markets to other sources and the scientific community in general, even though the test results are meaningless.

3. Despite Defendant’s failure to receive marketing authorization or approval from the Food and Drug Administration (“FDA”), Defendant has slowly increased its list of indications for the PGS, and initiated new marketing campaigns, including television advertisements in violation of the Federal Food, Drug and Cosmetic Act (“FDC Act”).

The suit gets to the heart of the questions that the FDA has raised about 23andMe: Do the company’s at-home genetic test kits work? Absent the scientific oversight of the FDA, how do consumers know that they are not being sold a genomic bill of goods?

At issue is the fact that 23andMe is not simply a fun way for people to play with genetics and perhaps learn more about their ancestry, a service the company still offers. It may have started out as such, but increasingly, 23andMe and other similar consumer genetics companies have moved towards marketing their services as a way to predict, and perhaps prevent, future health problems. It's 23andMe's claims that its interpretations of users' genomic data can provide health benefits, and not the genetic data itself, that's the concern.

According to the FDA, these diagnostic interpretations of consumer DNA make the Personal Genome Service a medical device, and thus subject to the agency’s regulations. The problem is that 23andMe has failed to provide adequate evidence that its statistical genetic analyses are actually statistically sound.

“The key issue here is that they are making claims about their product that are not backed up by science,” Ankcorn told Motherboard. “The results can be highly inaccurate, and for a lot of people, especially if the test tells them they are at risk for future health problems, the test is a lot more trouble than it’s worth.”

The second claim of the lawsuit highlights the more fundamental issues underlying 23andMe’s battle with government regulators. While the start-up’s short-term business plan is to sell $99 saliva tests to customers looking for more insight into their DNA, 23andMe is not really in the medical device game. In the long-term, the Personal Genome Service is simply a mechanism for collecting a massive amounts of genetic data that can then be used to conduct medical research, find genetic disease markers, and possibly find new treatments.

The company—which was co-founded by Anne Wojcicki, the estranged wife of Google co-founder Sergey Brin, and counts the search giant as one of its biggest investors—is making a financial bet that DNA sequences can be analyzed computationally using the correct search algorithms.

“The long game here is not to make money selling kits, although the kits are essential to get the base level data," 23andMe board member Patrick Chung, told Fast Company last month. “Once you have the data, [the company] does actually become the Google of personalized health care."

It is this innovative—and potentially lucrative—business model that has turned 23andMe into the darling of Silicon Valley’s biotech world, and a leader in the burgeoning industry of consumer genomics. While 23andMe’s privacy policy currently promises that the company will never sell personalized genetic information, it also reserves the right to sell that information in the aggregate, or use it to market other events and products to individual customers. It’s easy to imagine why medical researchers, insurance companies, and pharmaceutical firms would want access to a growing trove of genetic sequences annotated with metadata from customer surveys and published research.

As 23andMe gathers more genetic data from its customers’ spit tests, the statistical assessments of individual genetic risks will presumably become increasingly accurate. But in the short term, the company’s primary goal is to grow its database by selling more test kits, rather than ensure the clinical efficacy of the test results for its current customers.

From this perspective, the FDA’s action against 23andMe is not a case of the government trying to prevent people from accessing their own genetic information, or protect a 20th century paternalistic model of medicine. In fact, the agency is doing exactly what government regulation is designed to do: Protect consumers from unsafe or misleading medical products in cases where the company has little financial incentive to do so itself.

In an email to Motherboard, a spokesperson for 23andMe declined to comment on the class action lawsuit, and would not say when, or if, the company expects to resolve its regulatory issues. After an initially terse response to the FDA’s warning letter, Wojcicki said Tuesday that the company failed to communicate proactively with the government agency but is working to rectify the situation.

Despite Wojcicki’s apparent contrition, nearly every observer is baffled by the way 23andMe apparently handled its relationship with government regulators. According to the FDA’s warning letter, the agency had “more than 14 face-to-face and teleconference meetings, hundreds of email exchanges, and dozens of written communications” with 23andMe beginning in 2009, during which the agency provided feedback on how the company could prove that its test results are consistent. But the company has not responded to regulators for the past six months.

But, she added, “after numerous interactions with 23andMe, including as recently as January 2013, the FDA still does not have any assurance that the company has analytically or clinically validated the test for its intended uses.”

“Once you have the data, 23andMe does actually become the Google of personalized health care." — 23andMe board member Patrick Chung

In the wake of the FDA’s action, supporters of consumer genomics have accused the government of overreach, and questioned whether the agency should even be regulating personal genetic tests—and the information they provide to consumers—as medical devices.

As political blogger Ezra Klein noted in his column for Bloomberg View on Thursday, the Federal Food, Drug and Cosmetics Act was passed in 1938, and the section on medical devices was last updated in 1975—long before personal genetic testing, and underlying ideas about personalized medicine, came on to the scene. Given that 23andMe is fundamentally about big data genetics, the value of the product today is not necessarily indicative of what the value could be in 10 years.

Moreover, the FDA’s claim that genetic testing poses potential health risks is focused on the possibility that inaccurate test results could lead consumers to make dangerous medical decisions, a flimsy argument at best. Even if you believe that the government is responsible for stopping people from making rash health decisions, there are several steps a patient would have to take between testing positive for the BRCA-1 gene and undergoing a prophylactic mastectomy.

Still, the fact that 23andMe negotiated with the FDA for more than four years seems to indicate that the company accepted the agency’s oversight, and that government regulators were working to accommodate the new technology. Although we don’t have the details about private communications between the FDA and 23andMe, the agency’s letter states that the two parties were working on a “de novo classification” for the company’s Personal Genome Service, which means that 23andMe appears to have had an opportunity to shape the way that the government the consumer genetics industry. Instead, the company went silent, forcing the FDA to take action on its own.

“Either 23andMe is deliberately trying to force a battle with the FDA,” writes Matthew Herper, a Forbes reporter and veteran FDA watchdog, “or it is simply guilty of the single dumbest regulatory strategy I have seen in 13 years of covering the Food and Drug Administration.”

“This is not the story of a big regulator choosing to squash a small company,” Herper adds, “but of a company that decided it didn’t have to follow the rules.”

Driving this conflict is what more and more of the tech world sees as a basic culture clash between slow, outdated government bureaucracy and the techno-libertarian exceptionalism of Silicon Valley. Like other tech gadflies—see Uber and Airbnb—23andMe appears to think that government has no role when disruption is concerned, and can therefore be ignored at will. In this case, though, it looks like the genetics startup overstepped its bounds.

The company is backtracking while the FDA process plays out.. Earlier this week, 23andMe stopped selling genetic tests to new customers to comply with the FDA's warning. The company will continue to provide ancestry-related tests and raw genetic data without statistical analysis, information that will be largely meaningless to all but the most savvy customers. Visitors to 23andMe's site are now required to confirm that they understand that 23andMe does not provide health-related reports at this time.

The worst case scenario, for 23andMe and the consumer genomics industry as a whole, would be that the FDA action and class-action lawsuit deliver a one-two punch that forces the company to go out of business. Given 23andMe's dominance of individual genetics testing, that outcome would set the whole field back, and pave the way for government regulators to take bigger steps to stall advancements in personalized medicine.

But that outcome is unlikely. 23andMe has deep pockets and powerful backers, and the company has indicated that it's ready to get its regulatory ducks in order. Beyond that, neither the FDA or the company will say what exactly needs to happen before they can start selling the tests again. But in the end, the FDA's warnings might actually help the industry by firming up exactly what genomics firms can tell their customers.